Data-Driven Dining: Top Trends for Restaurants in 2019
A new year means new changes for restaurants looking to get ahead
As guests gain the freedom to customize meals, bypass long lines with online orders and have food delivered quickly to their door, expectations around the guest experience are changing rapidly. In response, restaurants are rethinking every aspect of the way they do business: pricing models, delivery, design, layout, technology and more.
Based on our experience working with leading global restaurants, here are the five 2019 restaurant trends to watch and how you can prepare to make the most of them.
QSRs and Fast Casual Grow Up
Fast casual restaurants have exploded in popularity over the past several years, fueled by trends in build-your-own menus and a shift towards better quality foods. For the past five years, visits to fast casual restaurants have increased annually, with high growth predicted to continue.
Many quick-service restaurants (QSRs) are hoping to ride the wave of fast casual growth by borrowing some of the most interesting architectural and technological elements of successful fast casual chains. From burger joints to sandwich shops, modern QSRs are enhancing the guest experience with a renewed focus on hospitality, introducing new layouts with indoor and outdoor digital menu boards, self-service kiosks, and open kitchens. In fact, 30% of ongoing restaurant remodel programs began last year — more than in any of the years prior.
With consumer expectations ever evolving, innovations on the guest experience have become front and center for both QSRs and fast casual restaurants. As restaurants aim to borrow "the best of the best" from competitive segments, industry leaders leveraging third-party data insights can gain a competitive edge by understanding a more robust picture of shifting guest preferences, shining light on previously untapped opportunities.
Solving the Delivery Equation
Delivery is growing rapidly and is increasingly moving online with the popularity of delivery apps. However, the picture is not necessarily a rosy one for all restaurant brands: while delivery can dramatically increase reach and sales, it often comes with several unique challenges.
The high costs of third-party delivery (typically 20%-30% of the order) have spurred many brands to debate whether they should partner with services such as DoorDash over building in-house capabilities like Wayback Burgers'. Moreover, the decision to partner, with whom, and under what circumstances, also has distinct implications on ultimate profitability and return on investment.
Apart from costs, delivery also poses the added challenge of relinquishing control over the guest experience. Rude or late service, for example, or food turning soggy as it's transported can tarnish a restaurant's brand over time. In response, many are exploring new ways to plate and package menu items, although the costs in time and material often outweigh the incremental benefits. Order mix is also frequently affected, often adversely, as customers buy fewer beverages and alcohol sales suffer.
As the delivery trend has become virtually impossible to ignore, restaurant brands must make tough choices around building partnerships vs. in-house capabilities. As a result, many are testing their delivery initiatives to navigate the risks and investments necessary to capitalize on the trend. Understanding if the incremental orders cover the added costs of delivery, in which markets delivery is actually profitable for the restaurant, and what combinations of items are being ordered can set brands up for success.
Crafting It for the 'Gram
From purple and pink blended drinks to pitch-black ice cream, restaurants are pulling out all the stops to cater to Millennials' and Gen Zs' thirst for experiences and social media-worthy content. For example, Arby's recently launched a duck sandwich for markets in the four "waterfowl migration flyways."
Beyond flashy food options, restaurants like Schlotzky's are also revamping their store designs in hopes that visitors will snap selfies and share on social media. Natural lighting, neon signs, painted murals, artistic floor tiles, wild wallpaper — just about anything to get guests to pose and post.
But while the picture-perfect menu items and souped-up decor may wow guests, restaurants should take care to accurately measure the sustained sales and margin benefit of such initiatives. Moreover, by evaluating the impact of capital investments on a range of KPIs, such as the percentage of new customers and share vs. independents or small chains, restaurants can gain a fuller picture of the impact of their remodels to identify opportunities to expand or roll back these programs in 2019.
Personalization Picks Up
Personalization is no longer a differentiator — it's table stakes. A recent Mastercard-sponsored Harvard Business Review survey of more than 600 business executives found that almost half of organizations are already successfully executing personalization efforts across channels, and more are following suit. While the majority of CRM efforts currently revolve around marketing and loyalty programs, spend-based insights and advanced segmenting capabilities are opening up new opportunities for personalized recommendations and experiences.
Combining AI technologies with the right third-party data sources can also allow restaurants to personalize experiences for customers regardless of loyalty program membership. Taking a view outside your four walls can generate richer insights around customer preferences and segmentations, helping to personalize outreach to prospect customers. Moreover, by analyzing which items are typically purchased together, as well as which combos drive larger checks, repeat visits and higher customer satisfaction, you can make more informed, profitable recommendations.
Experimenting with Pricing
With competition heating up and the stepwise increases in minimum wages significantly impacting brands' margins, it's more important than ever for restaurants to get pricing right. Some will look to increase prices; for example, Del Taco is planning to slightly increase prices and attempt to entice customers to purchase some of its more expensive items. Others like Taco Bell will take a different approach, expanding their value menus to encourage greater order size. No matter the approach, making changes comes with significant risk to all-important transaction volumes and margins — the wrong move can create very real challenges for the business.
Before broadly rolling out pricing changes, restaurants should analyze how their initiatives impact customer spend behavior and retention, as well as which customer segments are impacted. In particular, it's important to understand the cross-elasticity of target items and predict which markets can handle price increases without sending customers running to competitors. By rigorously testing price changes, mining for past increases and analyzing check-level impacts, restaurants can better understand which items tend to be purchased together and how changes in pricing and menus affect check size and check count alike. Executives can then use these insights to implement the right pricing strategies in the right locations.
Here's to Data Insights and Dining in 2019
Every trend in 2019 traces back to one essential factor: data insights. Developing a way to collect, manage, report and take action on anonymized and aggregated transaction data and other consumer segment behaviors — from both inside and outside your four walls — can help restaurants navigate the future with confidence. So, before you redesign that seating area, add that delivery option, Instagram-ready that floor, personalize that message or adjust that pricing, get your data analytics in order first. Your customers and your bottom line will thank you.
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